Iranian Parliament Speaker Says US “Will Regret” Withdrawing From Nuclear Deal

Iranian Parliament Speaker Ali Larijani said Monday that the US would face stiff consequences if it withdraws from the JCPA – informally known as the Iran deal.

Speaker of Iran’s parliament Ali Larijani said that Iran “had a developed plan and a certain law,” should the United States withdraw from the agreement on Tehran’s nuclear program, adding that Washington would “regret it,” Sputnik reported.

Larijani made the statement in St. Petersburg where he was taking part in a parliamentary forum.

President Donald Trump elicited cries of protest from the US’s co-signers of the pact, after saying last week that his administration had decided not to certify Iran’s compliance with the deal and would instead leave the final decision up to Congress. The Trump administration has repeatedly insisted that, while Iran is technically complying with the terms of the pact, it is more broadly violating the “spirit” of the agreement by allegedly continuing to fund terrorist groups and developing and testing ballistic missiles.

Trump’s speech, in which he also accused Iran of being a threat to global security, elicited howls of disapproval from the US’s partners in negotiating the deal.

“We encourage the US Administration and Congress to consider the implications to the security of the US and its allies before taking any steps that might undermine the JCPOA, such as re-imposing sanctions on Iran lifted under the agreement,” French President Emmanuel Macron, German Chancellor Angela Merkel and British Prime Minister Theresa May said in a joint statement.

In Brussels, Federica Mogherini, the EU foreign policy chief, said the Iran deal is an international agreement and “it is not up to any single country to terminate it.”

In a statement after Trump’s speech, Russia’s foreign ministry said there was no place in international diplomacy for “threatening” and “aggressive” rhetoric, adding that such methods were doomed to fail.

“It is a hangover from the past, which does not correspond to modern norms of civilised dealings between countries,” the statement said.

“We viewed with regret the decision of the US President not to confirm to Congress that Iran is fulfilling in good faith” the nuclear deal, it added.

During an appearance on CNN’s “State of the Union” on Sunday, Secretary of State Rex Tillerson claimed the US is trying to stay in the Iran nuclear deal while hoping to achieve more from it, days after President Donald Trump threatened to pull the US out of the agreement.

The 2015 deal, reached between Iran and the United States, Britain, France, Germany, Russia and the European Union, saw Tehran curtailing its nuclear program in exchange for the easing of crippling economic sanctions.

In an amusing development, Trump has urged lawmakers to adopt a bill co-sponsored by Senator “Little” Bob Corker (who has recently traded barbs with the president after saying he wouldn’t seek another term in the senate) that would impose so-called “triggers” like Iran continuing its provocative missile launches, or advancing its nuclear-enrichment capabilities to the point to where it could build a nuclear bomb in a year’s time. Any of these actions would result in sanctions immediately being reimposed.

The US’s allies – not to mention President Donald Trump’s political enemies – have insisted that Trump’s decision to throw a wrench in the works of the deal could lead to its collapse, which in turn would result in Iran resuming its nuclear program, reviving the possibility of a future military showdown with a nuclear-armed Iran.

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Car-Bomb Kills “One-Woman WikiLeaks” Who Led The Panama Papers Revelations

Meet Daphne Caruana Galizia, the journalist who led the Panama Papers investigation into corruption in Malta.

A blogger whose posts often attracted more readers than the combined circulation of the country’s newspapers, Caruana Galizia was recently described by Politico as a “one-woman WikiLeaks”.

To John Dalli, a former European commissioner whom she helped bring down in a tobacco lobbying scandal, Galizia is “a terrorist.”


To opposition MPs, she’s a political force of nature, one who fortunately has her guns aimed at the other side of the aisle.


“She single-handedly brought the government to the verge of collapse,” says one MP. “The lady has balls,” says another.


Galizia’s mantra was simple: blog relentlessly about the “cronyism that is accepted as something normal here. I can’t bear to see people like that rewarded.”

Her blogs were a thorn in the side of both the establishment and underworld figures that hold sway in Europe’s smallest member state.

Well, sadly, all that is over now, as Galizia was killed today when her car, a Peugeot 108, was destroyed by a powerful explosive device which blew the car into several pieces and threw the debris into a nearby field.

As The Guardian reports, her most recent revelations pointed the finger at Malta’s prime minister, Joseph Muscat, and two of his closest aides, connecting offshore companies linked to the three men with the sale of Maltese passports and payments from the government of Azerbaijan.

No group or individual has come forward to claim responsibility for the attack.

Malta’s president, Marie-Louise Coleiro Preca, called for calm.

“In these moments, when the country is shocked by such a vicious attack, I call on everyone to measure their words, to not pass judgment and to show solidarity,” she said.


“Everyone knows Ms Caruana Galizia was a harsh critic of mine,” Muscat at a hastily convened press conference, “both politically and personally, but nobody can justify this barbaric act in any way”.

The Nationalist party leader, Adrian Delia – himself the subject of negative stories by Caruana Galizia – claimed the killing was linked to her reporting.

“A political murder took place today,” Delia said in a statement.


“What happened today is not an ordinary killing. It is a consequence of the total collapse of the rule of law which has been going on for the past four years.”

Responding to news of the attack, the German MEP Sven Giegold, a leading figure in the parliament’s Panama Papers inquiry, said he was “shocked and saddened”.

“It is too early to know the cause of the explosion but we expect to see a thorough investigation,” said Giegold.


“Such incidents bring to mind Putin’s Russia, not the European Union. There can be absolutely no tolerance for violence against the press and violations of the freedom of expression in the European Union.

It doews make one wonder just what is happening in Europe, as Greece’s former finance minister tweeted…

21st century Europe: Execution in Malta of activist exposing tax cheats. Racism triumphing in Austria. And political arrests in Catalonia.

— Yanis Varoufakis (@yanisvaroufakis) October 16, 2017

Interesintgly, Muscat announced in parliament that FBI officers were on their way to Malta to assist with the investigation, following his request for outside help from the US government.


Caruana Galizia was 53 and leaves a husband and three sons.

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Move To Digital Currencies Accelerates As PBoC Successfully Tests Algos For Digital Money

In a story that seems to have gone largely unnoticed by the western press, the China Daily reported that the PBoC has successfully designed a prototype that can regulate its future supply of digital fiat currency.
In a report, “PBoC inches closer to di…

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VIX Shorts Hit New Record High As S&P Surpasses 2017’s Most Bullish Forecast

At the start of 2017, the most optimistic strategist forecast the S&P 500 at 2,500 by year-end.
S&P Year-End forecasts as of 1/6/17…

In the last few weeks, the market has not only surpassed that most-exuberant guess…

As Bloomberg n…

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15 Shocking Videos Expose The Reality Of Surviving The California Wildfires

Authored by Daisy Luther via The Organic Prepper blog,

The Northern California wildfires are fast-moving, unpredictable, and for some, unsurvivable.

The videos below will show you what it’s really like, trying to survive an ever-changing inferno…and why you shouldn’t wait for the official evacuation order.

A lot of folks have been critical, saying blithely, “They knew there was a fire. They should have evacuated.” It’s important to understand that it doesn’t always work like that with wildfires. Armchair quarterbacking is easy. Fleeing when the car your driving literally catches on fire and the smoke is blinding you is not.

First of all, fires move rapidly. You can be in no danger whatsoever and just see a fire on the distant horizon, and then minutes later, it’s at your back door. Secondly, they change courses. Many times, the fire gets ahold of some new fuel – like a home, tall grass, or trees, and the course veers in that direction. Finally, high winds have propelled these fires rapidly and fanned them to new heights. Every fall, California has something called the “Diablo Winds.” These are seasonal gusts that can reach as high as 80 mph and cause extremely high fire danger. When coupled with existing fires, it’s nothing less than the perfect storm.… 126w,… 252w,… 55w,… 269w,… 84w,… 101w,… 265w,… 143w,… 336w” style=”width: 560px; height: 667px;” />

October is often the worst month of the year for wildfires in California. Not only is it the time when the Diablo winds (or Santa Ana winds in Southern California) kick up, but it’s also the driest month. California has a long dry season. It isn’t unusual to go without a single drop of rain from May through the end of October. Because of this, all the lush grass that grows during the spring rainy season is dried, crisp, and tragically perfect fuel.

In situations like this, there is often little to no warning before the fire is roaring through your property. The fire may be miles away and heading in the opposite direction one minute, then turn on a dime. Then suddenly, you find yourself directly in the path of an inferno. If you’re lucky, you escape unscathed with your life but lose all your worldly possessions. Many people have not been lucky.

15 large wildfires are blazing through Northern California’s wine country. 40 people are confirmed dead, hundreds are missing, more than a 100,000 have evacuated, and nearly 6000 homes and businesses have been completely burned to the ground. Thus far, the damage estimate is more than 3 billion dollars.

The following videos and stories show you what the Northern California wildfires are really like.

This video is shot from a fire engine from Berkeley, California on the day Santa Rosa burned. It gives you the firefighters’ firsthand view of the destruction and the speed with which it was wrought.

This video shows the utter devastation from the wildfires and includes clips of people escaping with only their lives.

These two roommates left with their dogs as the fire jumped the hill behind their home, narrowly escaping death. (Strong language)

This police officer’s body camera shows the terrifying scene when he was helping people evacuate.

This couple described their escape as being like “driving through hell.”

This video shows multiple clips of people fleeing the blaze as embers rain down and the billowing smoke gets closer. They are trappd on the freeway in slow-moving traffic.

In one tragic story, a family tried to evacuate by car. Their car caught on fire and they had to take off on foot to try and outrun the blaze. They got separated in the smoke. A 14-year-old boy burned to death and the other members of the family are burned over more than half their bodies. The mother and daughter were found by a neighbor and the father was found by paramedics. (source)

In a story with a happier ending, a farmer tried to evacuate his dogs but one refused to go. Odin, a Great Pyrenees, stayed with his herd of goats. The owners were positive they’d never see their beloved dog again, but when they returned to the farm, they discovered a slightly singed Odin with every member of his herd unharmed. This very good boy had even picked up a few baby deer. (source)

Haunting drone footage shows what Santa Rosa looks like after the fire.

While I strongly recommend evacuating in a situation like this, one man stayed behind and managed to save his home and his neighbor’s home from the wildfire.

Along the Napa/Sonoma border, these residents scrambled for safety and barely escaped with their lives. There were fires in all directions, blocking escape routes. People had to choose whether to drive through blinding smoke or flames.

This couple survived a wildfire they couldn’t escape by taking refuge in a neighbor’s swimming pool for SIX hours as the fire blazed all around them.

Another couple who tried to take refuge in a pool was not so fortunate. The woman died in her husband’s arms after 60 years of marriage.

This family’s dog ran away in a panic and they had no option but to leave. They returned home, certain their beloved pup had perished, but then they found this:

These interviews tell the stories of more narrow escapes.

This aerial footage gives you a better idea of what firefighters are dealing with during these widespread blazes.

More than eleven thousand firefighters are pushing themselves to the limits of their endurance to contain these fires, but they aren’t able to directly respond and save people. As the mayor of Calistoga said in a press conference to the few who opted to ignore evacuation orders, “You will NOT be given life safety support at this point. You are on your own.” Exhausted firefighters are grabbing moments of rest when they can.

In some areas, civilians, farmers, and construction crews have taken a stand to protect their homes from the infernos.

The story of the Capell Valley community is one that was repeated in neighborhoods and valleys across Northern California’s wine country this week, as dry conditions and high winds fueled multiple fires in Sonoma, Napa, Yuba and Mendocino counties.


It was not only firefighters who stood in the path of the blazes, but civilians too. Contractors, skilled construction workers and even former wildland firefighters came out of the woodwork to run bulldozers and drive multi-thousand gallon water tenders on twisty and damaged back roads.

They picked up what tools and equipment they could and tried to save their neighborhoods….


This wasn’t the first time Gil Pridmore had fought a fire in those hills. He spent years as the boss of a California Department of Forestry and Fire Protection bulldozer crew and fought the 1981 Atlas Peak Fire.


He used this experience to help lead a team of 30 people to cut multiple layers of firelines on the rim of the valley.


When flames would breach their lines and encroach on houses, the goal was to get the house “in the black,” or completely surrounded by burned areas so there was no fuel left to catch fire. (source)

They managed to save all but one home in the valley.

A few things to learn from the California wildfires

There are lessons to be learned from these videos (and 5 years of living in fire-prone California.) Wildfires happen in other parts of the United States as well, and it’s important to be prepared before the first spark.

You need a fire kit in your vehicle at all times. Things to include:

  • Swimming goggles: This will protect your eyes and help keep you from being blinded by smoke
  • Respirator masks: This doesn’t mean you will be able to breathe if the fire sucks all the oxygen from your environment, but it will help to filter out some of the smoke so you aren’t disabled by a coughing fit.
  • Fire extinguisher: In a worst case scenario if your vehicle catches on fire, you may be able to put it out if you attack while the blaze is small.
  • Welding gloves: Remember the guy who burned his hands opening a gate? Welding gloves will offer some protection from hot surfaces.

And here are some tips.

  • Do not wait for the official order: In some parts of Sonoma County, people are questioning why an evacuation alert never came. While officials do their best, YOU are the person who is responsible for your family’s safety. (source)
  • Have more than one escape route: In situations like this, you will often find your escape route blocked. Have more than one way out. Figure these out ahead of time and now when you are fleeing for your life and blinded by smoke.
  • Evacuate large animals ahead of time. If possible, evacuate your livestock before the emergency becomes a crisis. In a situation like this, animals can be fearful and uncooperative. Get your livestock to safety first, because if you have to rush out like many of these families did, you’ll have to leave them behind, helpless. I shared good news stories above, but a friend of mine in California went to help out with veterinary rescue. There are far more bad news stories.
  • Leash or crate pets early on: They will be affected by the same kind of panic. A normally well-behaved pet could rush off into danger, leaving you to make the choice to leave them behind or risk your family’s lives trying to save them.
  • Grab your dirty clothes hampers: If you have time to grab a few things unless you have just done laundry, grab dirty clothes hampers. They’re likely to have several days of clothing from the skin out, PJs, and socks, saving you time from searching for all those things individually.
  • Keep precious items and documents in one area: Make sure irreplaceable things are kept together. We have a decorative trunk near the door into which we can sweep precious mementos. Important documents are backed up in the Cloud, which means we don’t have to spend time packing those.

The fires are beginning to be contained, and firefighters say they are gaining an edge. Two out of three of the most destructive fires are more than 50% contained. Some people in Sonoma will be allowed to return to their homes today – or what’s left of them. Winds have lightened, but the weather will still be hot and dry until Thursday when there is a small chance of blessed rain. (source)

I wish those in the affected areas the very best.

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North Korea Warns “Nuclear War Could Break Out At Any Moment”

Less than a day after South Korean and US naval forces kicked off their latest round of joint military drills, which are slated to run until the end of the week, North Korea’s deputy UN ambassador claimed during a fiery speech at the UN General A…

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Kobe Steel Scandal Goes Nuclear: Company Faked Data For Decades, Had A “Fraud Manual”

Last week we reported that in the latest instance of criminal Japanese corporate malfeasance, Japan’s third-biggest steel producer admitted falsifying data about the quality of steel, aluminum, copper, iron powder and other products it sold to customer…

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“This Is The Catalyst For Everything”: Deutsche Sees Only Two More Rate Hikes Before The Fed Loses Control

In his latest weekend note, One River CIO Eric Peters discussed, among other topics, what he thought would be the nightmare scenario if not for the current, then certainly next Fed chairman: a world in which despite the Fed’s best intentions (and we use the term loosely), the Fed continued to hike rates without any perceptible increase in wages and thus, long-term inflation expectations. The result would be a failure to raise bond yields, which would provide further ammo for stocks to keep rising ever higher into what even the Fed tacitly admits is increasingly an asset bubble. This is how Peters described the ominous dynamic that would lead to major headaches for the next (and perhaps current, if Yellen remains in her spot) dynamic:

“Global profits are rising, unemployment is falling, growth is up” said the strategist. “Yet bond yields seem unable to jump.” US 10yr bond yields are 2.27%, Germany 0.40%, Japan 0.05%. “The cyclical surprise is that the Phillips curve finally kicks in, just as everyone gives in.” US unemployment is 4.2%, a 17yr low. Germany 3.6%, a 37yr low. Japan 2.8%, a 23yr low. “And the biggest structural surprise is that technology has rendered wage inflation a phenomenon for the history books.” “But if we don’t see a sustained cyclical jump in wages, then yields won’t go up. And if yields don’t go up, then the asset price ascent will accelerate,” continued the strategist. “Which will lead us into a 2018 that looks like what we had expected out of 2017; a war against inequality, a battle for Main Street at the expense of Wall Street, an Occupy Silicon Valley movement.” He paused, flipping through his calendar.  “Then you’ll have this nightmare for the next Federal Reserve chief, because they’ll have to pop a bubble.”

Today, picking up on this divergence between rising short-term rates, and an inability – and unwillingness – of the long-end to reprice higher which continues to manifest itself in a flattening of the yield curve, where today the 2s10s pancaked to the lowest since the financial crisis…

… a move which continues to be ignored by markets…

… was Deutsche Bank’s derivatives strategist Aleksandar Kocic who confirms what Peters said, and argues that “for anything to happen, long rate has to move higher.” Taking a slightly different angle than Peters however, who focused on the structural deflationary forces which prevent the curve from steepening, Kocic frames a move higher in longer yields as one which underscores the trap the current (or future) Fed chairman is in: any notable steepening would be an indication of the Fed potentially losing control, or as Kocic puts it “possible missteps in monetary policy unwind” and a “disorderly unwind of the bond trade”, with the end result being an explosion in pent up volatility: “this is the risk that would be probably impossible to control, its trigger being either excessive deficit spending or inflation. “

As a result, Kocic writes that the Fed “has an uncomfortable (and complicated) task in this context: Fed needs to raise rates in order to prevent rates rise. What must not be, cannot be: Inflation cannot be allowed to develop because it would be no way of avoiding dramatic rise in rates. If the Fed embarks on aggressive hikes in order to fight inflation, rates would rise. If the Fed stays behind the curve, the market would bear steepen the curve. Either way, the long rates go up.”

Which, ironically, as Peters explained, is precisely what needs to happen to avoid the continued blowing of a massive equity bubble,or to summarize: the market finds itself in an increasingly unstable dysequilibrium in which on one hand the stock bubble grows ever bigger, while on the other, a normalization in equities is intimately linked to the Fed losing control of the yield curve. And, as Kocic has claimed on prior occasions, the ultimate catalyst that can trigger an end to this “metastable” market state is inflation. The outcome, in either case, would be explosive.

Here is Kocic:

With abundant liquidity, Fed transparency, and “predictable” political shocks, we have entered a regime of noisy status quo whereby the only temporary source of transient bid for gamma could be triggered by possible missteps in monetary policy unwind. However, even that seems to be relatively unlikely and, even if it happens, episodic at best. The largest, and possibly, the only risk capable of resetting the vol higher is the tail risk associated with bear steepening of the curve and disorderly unwind of the bond trade. This is the risk that would be probably impossible to control, its trigger being either excessive deficit spending or inflation.


It is precisely the severity of this problem that prevents return of volatility. Current monetary policy is focused on the management of the underlying tail risk and the Fed transparency and gradual hikes are all about the reduced maneuvering space that has remained after almost a decade of stimulus. Fed has an uncomfortable (and complicated) task in this context: Fed needs to raise rates in order to prevent rates rise. What must not be, cannot be: Inflation cannot be allowed to develop because it would be no way of avoiding dramatic rise in rates. If the Fed embarks on aggressive hikes in order to fight inflation, rates would rise. If the Fed stays behind the curve, the market would bear steepen the curve. Either way, the long rates go up.

Going back to the increasingly flatter curve, this is what Kocic defines as the “maneuvering space” left for the Fed. One look at the chart above confirms that said space is getting increasingly smaller. A flat, or worse – inverted – yield curve would imply game over. Here is Kocic again, who points out that the steepness of the curve is the “market’s playground”, in which “everything that can happen, has to happen inside this space”… a space which is curently a paltry 60 bps and shrinking every day:

The gap between the Short term rate expectations and the Long rate represents the remaining maneuvering space that the Fed has left. This gap defines the playground for the markets — everything that can happen, has to happen inside that space. This gap is narrow, currently at 60bp .

Mechanistically, this is logical, as the longer the current business cycle continues without a recession – and some immaculate increase in productivity and r-star – the flatter the curve become:

If the Fed has a long way to go into the cycle, the back end remains steep. However, as the hikes approach the final destination (the Long rate), the curve will continue to flatten reflecting the declining inflation expectations. These are pure mechanics of the Fed cycle. These stylized facts are illustrated in the Figure 14.


This is also a problem, because all else equal, the Fed has at most two more rate hikes before it loses control. In the interim, it somehow has to reprice both risk premia and vol higher… but without crashing equities, forcing a new easing cycle, which may include not only more QE but also NIRP:

“Given where long rates are, Fed appears as overly hawkish – it has only two more hikes to go and, for volatility and risk premia to reprice higher, the gap has to widen. As is appears unlikely that the Fed will be cutting rates any time soon, the gap could widen only if the Long rates sell off.”

And, as noted above, “for anything to happen, 5Y5Y sector has to move higher”, however the $6.4 trillion question is whether this sell off in long rates will be violent or controlled. As Kocic concludes, “This is the catalyst for everything.”

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Bernanke Backs ‘Ripple’ At Blockchain Conference: “The Tech Is Promising”

Two months ago we noted former Fed chief Ben Bernanke’s apparent flip-flop since leaving office as he agreed to be the keynote speaker at a blockchain conference.

Having warned in 2015 of “serious problems” with bitcoin due to its “instability” and “anonymity”…

[Bitcoin]’s interesting from a technological point of view. We’re in a world where the payments system is evolving quickly and new approaches to managing payments are proliferating, and some of the ideas around bitcoin will no doubt be useful in doing that.


But I think bitcoin itself has some serious problems. The first is that it hasn’t shown to be a stable source of value. Its price has been highly volatile and it hasn’t yet established itself as a widely accepted transactions medium.


But the real serious problem that it has is it’s anonymity, which is a feature, and is also a bug, in that it has become in some cases a vehicle for illicit transactions, drug selling or terrorist financing or whatever. And you know, governments are not happy to let that activity happen, so I suspect that there will be oversight of transactions done in bitcoin or similar currencies and that will reduce the appeal.

But Bernanke told an audience at Ripple’s Swell event in Toronto today that:

“…new technology like blockchain or electronic currencies can be used to improve” global payments, and added that Ripple’s technology is “promising” as they work with regulators.

As a reminder, Ripple is considerably different from Bitcoin. That’s because Ripple is essentially a global settlement network for other currencies such as USD, Bitcoin, EUR, GBP, or any other units of value (i.e. frequent flier miles, commodities).

To make any such a settlement, however, a tiny fee must be paid in XRP (Ripple’s native tokens) – and these are what trade on cryptocurrency markets.

In other words, Ripple runs on many of the same principles of Bitcoin, but for a different purpose: to serve as the middleman for all global FX transactions. If it can successfully capture that market, the potential is high.

*  *  *

Mor details on what Bernanke said to come, but for now Ripple prices are rising…

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“There Were No Calls, That’s Absolutely Crazy”: How The Stock Market Died

Something unexpected happened on the market’s relentless trek to all time highs: the market died.

At least that is the impression one gets from walking around Wall Street’s formerly busy trading desks (certainly the formerly biggest trading floor in the world, that of UBS, now hauntingly empty) where these days one can hear a pin drop. Take the Credit Suisse Prime Brokerage desk in Manhattan for example: here, as BusinessWeek reports in its 1987 anniversary issue, “the phones hardly seem to ring anymore.” In fact, if one didn’t know better, one could assume that instead of all time highs, the market has just experienced another spectacular crash resulting in a universal trading revulsion.

Credit Suisse’s hedge fund clients don’t call about Donald Trump’s tweetstorms and the stock market or ask what to do when terrorists attack. And there was barely a whiff of panic when North Korea erupted in August. “Two rockets flew over the land mass of Japan and nothing happened,” says Mark Connors, Credit Suisse’s global head of risk advisory.

Connor’s assessment, in not so many words, the market has died: “There were no calls. That’s absolutely crazy.”

Why crazy? Because traders who don’t belong to the millennial generation, will recall that in addition to buyers, stocks also have sellers. But not now, unfortunately, because what goes on in Credit Suisse’ prime brokerage desk does not stay in Credit Suisse’ prime brokerage desk. Instead, it’s become the norm on Wall Street. “Whether it’s the threat of nuclear war, hurricanes, or Russian meddling, it seems nothing can unnerve investors bent on pushing the U.S. stock market higher and higher. Even Richard Thaler, who won a Nobel Prize last week for explaining how irrationality drives financial markets, said on Bloomberg Television he couldn’t understand why stocks keep going up now.

What is causing this unprecedented meltup? The same thing we first presented in 2010: the “Buy The [Fucking] Dip” (which subsequently became “Buy the Fucking All Time High“) mentality, originally popularized by a couple of cartoon characters, which has since become the one and only “trading strategy” on Wall Street – and everywhere else – and which is also known as “don’t sell anything.” Because why sell in a world in which central banks have everyone’s back?

“So what’s going on?” Bloomberg asks and ponders:

During most of the first 8½ years of the bull market, the mood was paradoxical. Although stocks rose, many investors scarred by the financial crisis acted as though they hated owning shares again, and every obstacle was framed as the next big meltdown (even as the underlying fundamentals remained strong). Now, everywhere you look—swelling stock valuations, hot sales of new cryptocurrencies, IPO shares with no voting rights—investors are embracing their speculative side. In the language of Wall Street, every day it’s “risk-on.”

Actually, dear Bloomberg authors – while we do realize the question is rhetorical – the answer is simple. Bubbles. Bubbles everywhere.

Back in June Citigroup’s hans Lorenzen pointed out precisely what was going on in financial markets that scramble to maximize every last ounce of what central bank impulse remains, in which we get such bubbles as London real estate, bitcoin and vintage cars amid the Fed’s attempts to “facilitate recovery”, or as Citi puts it: “the wealth effect is stretching farther and farther afield.”

And while on the upside the surge in sweet for everyone involved, it’s what happens when bubbles burst – as they always inevitably do – that is the problem, a problem which the Fed clearly is not concerned about (and for Janet Yellen, in just three months it will be someone else’s problem).

Unfortunately, the realization that it is a bubble provides little relief for those who careers depend on being fully invested, i.e. all of Wall Street. Which is also why goalseeked justifications and rationalizations – “the market is a bubble, but a much smaller bubble than bonds, etc.” – emerge. This is also known as FOMO, or Fear of Missing Out. As a result, as Bloomberg notes, while it is an uncertain world out there, “fear invariably turns into greed, and the fear of missing out overshadows any anxiety about the next crash.” That tends to quickly draw money back into the market every time it wobbles, despite legitimate worries about high valuations.

“We certainly all joke about it: Buy the dip, that’s what we’ve been conditioned to do,” says Benjamin Dunn, president of the portfolio consulting practice at Alpha Theory, which works with money management firms. “Now you kind of have to do it. It’d almost be irresponsible not to.

A joke for some, perhaps, but in the end all that will be left are tears, of course. Until then, however, the market not only refuses to crash, it hasn’t had a mere 2% drop in months.

Another way of seeing the market’s unprecedented complacency: the number of days with a 1% up or down move in the S&P is below 10 so far in 2017, among the lowest on record. By comparison, the post WWII average is over 50.

In light of the above, it is not surprisng that This year, the S&P 500 index has hit records on almost four dozen different occasions, with the single biggest drop from the latest record amounting to less than 3 percent. At the same time, more than $3.2 trillion of market value has been added to U.S. equities (and $5 trillion since Trump’s election as he will gladly remind his twitter followers each day) while volatility is at record lows.

And speaking of goalseeked justifications for this epic, artifical, central-bank inspired rally, that’s what Bloomberg does next: 

It’s easy to say it’s all about Trump and his promise of big tax cuts. His election has fueled some impressive gains (though perhaps not quite as impressive as he has often claimed and still far short of the best year for U.S. stocks during this current cycle). But for Credit Suisse’s Connors, the shift in market psychology can be traced back to a different signal event: Brexit.


After the U.K. voted to leave the European Union in June 2016, $2.6 trillion was wiped off the value of equities worldwide in just three days. Many were calling it one of the most dramatic and shocking turns of events in modern British history. Among investors, the panic was palpable, and some were paralyzed with fear. But almost as quickly, the markets roared back and jolted investors out of their crisis-era fatalism.


Since then, naysayers selling into any weakness have looked like suckers. In the aftermath of other post-crisis upheavals, “we got a lot of incoming client calls,” Connors said. “But that all ended with Brexit. Now, even though the events seem dire, volume is low and and reversals are sharp. People are looking through to things that keep them long. Buy-the-dip is in place.”

None other than JPMorgan’s Marco Kolanovic quantified this effect, showing that starting with the August 2015 ETFlash crash, and passing through the Brexit, Trump and ultimately Italian vote, the BTFD rebound has been shorter and shorter, shrinking from 65 days to just a few hours. This is what Kolanovic wrote last December:

It appears that the time horizon of macro traders has shortened, likely as a result of increased participation of machines and algorithms that are quicker to adjust to significant events and can eliminate trading activity of slower investors. Consider for example the US elections – traders in Japan registered a 5.4% Nikkei drop on the 9th, followed by a 6.7% rally on the 10th, while S&P 500 investors did not register a significant close-to-close move over the election (due to market hours difference). These two days were enough to shift the volatility regime (usually calculated from closing returns) for the whole of 2016 for the Japanese equity market, and leave it unchanged for S&P 500 (e.g. think of rebalancing needs of a hypothetical risk parity fund, or a short volatility strategy based on Nikkei vs. one based on S&P 500). We also noticed that for a number of significant catalysts this year (Brexit, US Election, Italy Referendum) broad expectations were wrong both on the outcome and the directionally forecasted impact. It is possible that the lack of market reaction (or a reaction that went against the accepted narrative) was in part driven by investors’ reluctance to transact (“two negatives equal a positive”).

Whether central banks are involved in some capacity in these dramatic rebounds remains to be seen: so far all that has been publicly documented is that both the BOJ and SNB, as well as various sovereign wealth funds, have been aggressive in purchasing and accumulating stocks come rain or shine, with zero regard for price. Why would retail investors and algos not piggyback?

And piggybacking is precisely what retail investors are doing, hopeful to profit during the upcoming melt up phase, as Ed Yardeni found out just a few days ago.


The former chief economist for Deutsche Bank was in Texas recently, visiting clients. In hurricane-ravaged Houston, locals were still dealing with the aftermath of Harvey, and two clients couldn’t meet because of damaged buildings.

Yet there was one thing on everyone’s mind. “They wanted to talk about the potential for a stock market melt-up,” he says. A melt-up is a last-gasp surge like the one in 1999, when the Nasdaq doubled—just before it crashed. Nothing like it has happened in this bull market. To the extent 2017 has a precedent, the current backdrop is closer to 1995 or 2013, when the S&P 500 gained 30 percent or more with barely a peep of turbulence.

So there’s the self-fulfilling prophecy of a “melt up”, there is also the sense that investors have become invincibly, riding on the coattails of $14 trillion in central bank liquidity and not realizing it:

According to Wedbush Securities Inc.’s Ian Winer, all the things underpinning the gains, from robust earnings and the Federal Reserve’s low interest rate policy to the falling dollar and the retreat of sellers, has created a sense of invincibility. “Is the risk priced into the market appropriate to what the real risk is?” says Winer, the firm’s director of equities. “To me, it isn’t. People have grown more complacent and certainly more speculative, and it’s a little bit frightening.”

Of course, knowing it’s a bubble is meaningless, unless one also knows when it will burst. And it is this that is the problem, as Bloomberg points out:

it’s far from obvious what will trigger the next downturn or when investors should get out. The hazards of market timing were illustrated by a Bank of America Corp. study last year, which showed that missing the very end of a bull market often means missing a quarter of its gains. What’s more, anyone who owned stocks just before they crashed in the worst bear market since the Great Depression would still have doubled their money as long as they had the fortitude—and enough of a financial cushion—not to bail.

Meanwhile, and most ironically, the biggest losers even as the zombie market, in which nobody bothers to sell any more hits all time highs, are professional, active investors, who have become a dying breed, among the biggest active to ETF, or passive, asset allocation shift in history. 

Among the very few who are happy with the current “dead” market, is the Vanguard Group, whose trillions of dollars in low-cost and index-tracking funds have been credited and blamed for the current market mood, as so many retail investors have decided just to buy a diversified fund and forget about it—the new mindset is a sign of a job well done.

“To see people not trading wildly on political news is optimistic,” says Fran Kinniry, a principal in Vanguard’s investment strategy group. “Investors are acting in a very positive way, how a professional investor should be investing. Have an asset allocation and rebalance it, and do your best to differentiate between the noise vs. reality.”

Still, one can’t help but wonder just how professionally these investors will be acting during the next, perhaps last, ETFlash crash, one which will make the August 24, 2015 market break, ETF and VIX freeze seem like a walk in the park. One thing that is certain: the market will simply shut down that day. The question is for how long, and will it ever reopen.

The post “There Were No Calls, That’s Absolutely Crazy”: How The Stock Market Died appeared first on

The post “There Were No Calls, That’s Absolutely Crazy”: How The Stock Market Died appeared first on